Friday, July 1, 2016

China spends $80 billion on oil and gas in Nigeria

Chinese businesses have pledged to invest US$80 billion on oil and gas infrastructure projects in Nigeria, the country’s state oil company said.

The announcement of the Memorandum of Understanding follows a roadshow in China by Nigeria’s Oil Minister and chief of the Nigerian National Petroleum Corporation (NNPC), Emmanuel Ibe Kachikwu. The deals, NNPC said in a statement, involve everything from pipelines to refineries to power generation.

The West African country, which has traditionally been ranked as the sixth-largest oil producer globally, has recently run into serious trouble, and its oil and gas infrastructure are in need of a serious update, with none of its four refineries reaching peak production due to poor maintenance.

"Memorandum of understandings (MoUs) worth over $80 billion to be spent on investments in oil and gas infrastructure, pipelines, refineries, power, facility refurbishments and upstream have been signed with Chinese companies," said NNPC in a statement.

On top of the sharp oil price decline of the past two years, Nigeria has had to deal with a huge fraud scandal concerning the NNPC’s alleged failure to pay US$16 billion to the government.

The latest blow to the industry that contributes the most to GDP was the flurry of militant attacks on oil and gas infrastructure in the Niger Delta by an organization calling itself the Niger Delta Avengers, which vowed to bring the country’s oil production to zero through bombings of production and transportation facilities, in defense of the interests of communities living in the Niger Delta.

This zero production status has not been reached yet, but the organization has managed to cut output by 600,000 barrels per day, and is now calling for a referendum aiming to overhaul Nigeria’s political system. Meanwhile, the attacks prompted a temporary rally in international crude prices, highlighting Nigeria’s importance in benchmark price-setting.